The highway enters the Portland city limits near the Sylvan neighborhood, where it is also joined by Oregon Route 8; east of here the highway descends a steep grade through a canyon which penetrates Portland's West Hills; this stretch of the Sunset is coincident with Canyon Road. The highway skirts the southern edge of Portland's Washington Park, providing access to the Oregon Zoo and other attractions. At the bottom of the grade, the highway passes through the Vista Ridge Tunnel into downtown Portland. Immediately east of the tunnel is an interchange with I-405; this interchange is the end of the Sunset Highway.

There were plans to construct a freeway alignment of US 26—the Mount Hood Freeway—to bypass Powell Boulevard; however this project was canceled as a result of the freeway revolts in the 1970s. A few ramp stubs from Interstate 5 (on the Marquam Bridge) stand as evidence of this project. Roadway connections between the Portland freeway network and Mount Hood remain a big problem, as there is no good direct highway connection.

The Sunset Highway was originally named the Wolf Creek Highway and was under construction by January 1933.[4] Both the Works Progress Administration[5] and the Civilian Conservation Corps participated in the construction during the Great Depression.[4] Portions of highway officially opened to the public on September 19, 1941. In 1949, the highway was completed. The Sunset name is from the shoulder sleeve insignia and nickname of the 41st Infantry Division, which was largely drawn from Oregon, and for which the highway is dedicated.[6]

Milepoints are as reported by ODOT and do not necessarily reflect current mileage. Z indicates overlapping mileage due to construction longer than established route, and – indicates negative mileage behind established beginning point.[8] For routes traversing multiple named state highways, each milepoint is preceded by the corresponding state highway number.